The East Grand Forks City Council conditionally approved a liquor license to a local establishment Tuesday evening, even after the business's attorney said the decision stood on shaky legal ground and could be challenged in court.

The council narrowly approved the renewal of a liquor license for Boardwalk Bar and Grill with conditions that a dispute over a long-lost $510,000 economic development loan associated with the building it's housed in be resolved within a year. The loan was made in 1999 to Boardwalk Enterprises, not the bar, but the two have similar ownership, according to public records and the East Grand Forks Exponent newspaper.

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Jon Brakke, an attorney representing Boardwalk, told the council it didn't have the legal authority to set conditions on the license renewal because the bar and building are separate entities, and because the loan is owed to the city's Economic Development Authority and not the city itself.

"The bottom line from a legal perspective is that you are being asked to rely on a code section that will simply not support the conditions that are suggested in the resolution," Brakke said.

Jane Moss, a shareholder and operating manager of Boardwalk Bar and Grill, criticized City Council member Marc DeMers for questioning whether the city should approve the liquor license in the first place in mid-May.

"You hurt my business and you hurt my employees," she told the council.

Moss said other loans owed to the EDA are current.

Brakke said clients may worry about the conditional nature of the license and cancel future events at the Boardwalk.

"And the loss of that revenue ... may force the Boardwalk to close," Brakke said, which would result in the loss of tax revenues and local jobs.

Bargaining table

The Boardwalk Enterprises loan was first revealed in a city meeting in April 2014. The city didn't file the mortgage documents when the loan was first made in 1999, and both sides have expressed surprise over the debt.

Boardwalk officials have argued the city is responsible for $742,000 in construction and other costs as part of the 1999 agreement. A closed-door meeting between the two sides in August did not result in a solution.

"We're in disagreement about what the real number should be," City Council member Mike Pokrzywinski said. "But what the voters expect from us is to collect the money that was loaned and not paid back."

Brakke said they were willing to negotiate, but not "at the point of the sword."

"My concern is that if the resolution being contemplated is passed, we have to sue because we believe that the resolution is fundamentally improper under the city code," Brakke said. "We don't want to sue."

Brakke suggested that the city renew the liquor license without conditions.

"Let's get back to the bargaining table," he said.

East Grand Forks City Attorney Ron Galstad said he believes the city has the "legal authority to follow the recommendations."

'Poor job'

After the council's vote, Mayor Lynn Stauss said "we as a city did a very poor job" in handling the Boardwalk issue, arguing that it was wrong that the issue ended up in the press before the city talked to Boardwalk. Stauss had previously recused himself from discussions over the loan over family ties to Boardwalk Enterprises. Boardwalk partners Dan and Scott Stauss are his brother and son, respectively, according to Herald archives.

"That isn't the way to discuss the bill," Lynn Stauss said, adding that Boardwalk has "legitimate bills" against the city "and the city is going to have to sit down and settle those."

The resolution passed Tuesday approves the Boardwalk Bar and Grill liquor license, conditioned on the resolution by Boardwalk Enterprises by way of legal proceedings, the parties' agreement to mutual mediation and resolution of the dispute, arbitration of the issue or the parties negotiating a settlement. It passed 4-3, with DeMers, Pokrzywinski, Clarence Vetter and Henry Tweten voting in favor.

City Council President Mark Olstad said the two sides should move forward and work together.

"I'm not in favor in passing it with conditions on it," Olstad said.

George Kelley, an East Grand Forks resident and part-owner of Dakota Harvest Bakers in Grand Forks, said he's been a vendor for Moss providing baked goods and said her business has never been late on a payment. He urged the council to defeat the resolution.

"The City Council is making a fundamental mistake of confusing Boardwalk Bar and Grill and Boardwalk Enterprises and tangling this mess together," he said.